A supervisor with the state Department of Revenue funneled more than $5million in bogus tax refunds over the past year into fraudulent bank accounts, including a one-time transfer of $679,000, investigators said Monday.

Michelle Cawthra, 30, was arrested Saturday along with Andre Holliday, a 41-year-old clothier who runs a high- end shop in Cherry Creek North.

Both were ordered held Monday on $10 million bail in the Arapahoe County jail on suspicion of theft.

“We were concerned, with that amount of money, that she could be a flight risk,” said Joe Morales of the Denver district attorney’s office. “That’s why the bond is so high.”

Cawthra is suspected of using the names of former Revenue Department employees to generate bogus tax-refund claims and then signing off on the refunds, several for amounts of more than $20,000, according to the arrest affidavit.

But Cawthra also “fraudulently transferred” large sums – between $87,000 and $679,000 – to several accounts “owned or controlled by Randell and Holliday,” the affidavit said.

“The smaller checks tripped her up,” Morales said, when co-workers recognized an associate of her boyfriend and grew suspicious.

There may be even more money missing, and authorities do not know how much money they will be able to recover, Morales said.

The affidavit isn’t clear on the timeframe of the larger transfers, nor does it go into details on security measures the state uses to check such transfers.

The Revenue Department declined to comment about details of the case.

“Let’s hope that in the course of the investigation, grand jury or otherwise, that these things come out,” said department spokeswoman Diane Reimer.

State Rep. Al White, a Winter Park Republican who is a member of the Joint Budget Committee, was “terribly distraught” by the accusations. “It’s our jobs to watch out after these funds,” he said.

White said the JBC will not only follow the criminal investigation but also probably investigate the Revenue Department’s accounting-security procedures. Legislators want “to see where the cracks existed to allow these dollars to fall through and why nobody up until now was able to catch it,” he said.

Gov. Bill Ritter, in a statement, said government officials will work with investigators.”This is a serious situation, and I have instructed everyone in state government to continue cooperating fully with the investigation,” the statement said.

The affidavit said Holliday owns a haberdashery, Clothing by Andre, at 326 Saint Paul St. His website said the business caters to Colorado professional athletes. The store, which features high-end designer suits inside a spacious, marble-floored boutique, is open by appointment only.

Randell owns a multimedia company, TRU Dat Entertainment, with interests in films, fashion, sports and music, according to a website and the affidavit.

Kieran Nicholson covers breaking news for The Denver Post. He started at the Post in 1986, at the old building on 15th and California streets. Nicholson has covered a variety of beats including suburbs, courts, crime and general assignment.

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